Core Viewpoint - Redwire is acquiring Hera Systems, a profitable spacecraft developer, at a bargain price, which is expected to enhance its future growth and profitability despite recent financial challenges [4][5][7]. Financial Performance - In Q2, Redwire's revenue grew by 30% year over year, exceeding analyst estimates by nearly $10 million [2] - However, the company reported a loss of $0.42 per share, which was four times greater than Wall Street's expectations, and free cash flow turned negative at $11.2 million [2][5]. Acquisition Details - Redwire will acquire Hera Systems for an undisclosed amount, with expectations that Hera could contribute up to $10 million to Redwire's 2024 revenue [4][6]. - The acquisition price implies a price-to-sales ratio of just 0.5, which is considered a bargain for a profitable space company [7][8]. Strategic Implications - The acquisition positions Redwire to enter the emerging market for spacecraft that can service other spacecraft in orbit, known as "space tugs" [9]. - Hera is contracted to build three satellites for an on-orbit servicing demonstration under a U.S. Space Force contract, indicating strategic alignment with national security missions [9][10]. Future Outlook - Analysts forecast a return to positive free cash flow for Redwire as early as next year, with strong double-digit sales growth expected through 2027 and beyond [11].

Financial Data and Key Metrics Changes - The company achieved revenue of $78.1 million in Q2 2024, representing a 30% increase compared to Q2 2023 [4] - Adjusted EBITDA was positive at $1.6 million, with a last 12 months (LTM) cash from operations of $5.7 million [4][22] - The net loss for the quarter was $18.1 million, impacted by a $9 million loss due to changes in the fair value of warrants [4][19] - Ending liquidity improved to $55.8 million as of June 30, 2024, marking a 54.1% increase year-over-year [25] Business Line Data and Key Metrics Changes - The company reported $114.4 million in contracts awarded during the quarter, with a LTM book-to-bill ratio of 1.28 times [4][16] - Significant growth in backlog was noted, increasing by 29.9% year-over-year to a total of $354.3 million [16] - The company delivered over 50 flight antennas and has more than 180 additional antennas in development for various government missions [9] Market Data and Key Metrics Changes - The company has a healthy pipeline with an estimated $5.7 billion in identified opportunities, including approximately $1.9 billion in proposals submitted year-to-date as of June 30, 2024, representing a 288.5% increase year-over-year [17] - More than 91% of revenue is derived from government programs or global marquee customers [21] Company Strategy and Development Direction - The growth strategy is centered around four key principles: protecting the core, scaling production, moving up the value chain, and venture optionality [5] - The company is focusing on developing capabilities in Very Low Earth Orbit (VLEO) to enhance defense and intelligence operations, with significant contracts awarded from DARPA [11][12] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed full-year revenue guidance of $300 million, indicating a 23% year-over-year growth rate [26] - The company is focused on balancing revenue growth with profitability and investments for future growth while maintaining liquidity [31][60] Other Important Information - The company is investing in a new 30,000 square foot microgravity payload development and space operations facility [18] - The company has made significant investments in capital expenditures and internal research and development to support growth [24] Q&A Session Summary Question: Guidance and Outlook for the Second Half - Management explained that the guidance reflects a strategic balance and that the first quarter had lumpiness due to material buys [30][31] Question: EAC Adjustments - EAC adjustments were small and spread over multiple contracts, with no significant impact on cash flow [33][34] Question: Implications of U.S. Presidential Election - Management believes space funding is a bipartisan imperative and highlighted the company's revenue diversification [36] Question: Submitted Bids and Opportunities - The company is seeing scalable opportunities across various market segments, with a focus on larger quantity orders and full spacecraft prime contracts [38] Question: Venture Optionality and PIL-BOX Missions - Management expressed optimism about the venture optionality segment, noting a shift from experimentation to regular production-like activity [40][52] Question: Capacity to Deliver on Increased Bids - The company has detailed planning processes to ensure capacity aligns with bid submissions, allowing for simultaneous scaling [42][44] Question: Free Cash Flow Outlook - Management refrained from providing specific guidance but emphasized the positive trends in cash from operations on an LTM basis [59][60]

#Pública | --- | --- | --- | --- | --- | --- | --- | |----------------------------|--------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Earnings | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For further | info | | | | | | | point your for MD&A 2Q24 | mobile | | | | | | - - - - - - - - - - - - - - #Pública Adjusted Net Income 1H24 R$ 18.8 Targeted strategy and growing results billion 1H24 / 1H23 + ...

Revenue Performance - Revenues increased 30% to $78.1 million for the three months ended June 30, 2024, compared to $60.1 million for the same period in 2023[131]. - Revenues increased by $48.2 million, or 41%, for the six months ended June 30, 2024, compared to the same period in 2023, primarily due to larger contract sizes and increased production volume[145]. - Contracts awarded during the three months ended June 30, 2024, totaled $114.4 million, compared to $45.6 million in the same period of 2023, reflecting a year-over-year increase of 150%[162]. Cost and Expenses - Cost of sales increased by $20.9 million, or 47%, for the three months ended June 30, 2024, driven by increased labor, materials, and subcontractor costs[132]. - Cost of sales rose by $50.5 million, or 58%, for the six months ended June 30, 2024, driven by higher labor and subcontractor costs associated with larger contracts in power generation[146]. - Selling, general and administrative expenses as a percentage of revenues decreased to 23% for the three months ended June 30, 2024, from 29% during the same period in 2023[135]. - Selling, general and administrative (SG&A) expenses increased by $1.7 million, or 5%, but as a percentage of revenues, SG&A decreased from 29% in 2023 to 21% in 2024, reflecting improved cost discipline[148]. - Research and development expenses decreased by $0.3 million, or 16%, for the three months ended June 30, 2024, compared to the same period in 2023[137]. - Research and development expenses increased by $0.3 million, or 13%, due to strategic investments in microgravity payloads, radio frequency, and power generation technologies[150]. - Interest expense, net increased by $0.3 million, or 13%, for the three months ended June 30, 2024, due to unfavorable changes in variable interest rates[138]. - Interest expense, net increased by $0.6 million, or 12%, primarily due to higher costs of capital and increased borrowings on the revolving credit facility[151]. Profitability and Loss - Gross margin decreased by $2.9 million, or 18%, with a gross margin percentage of 17% for the three months ended June 30, 2024, down from 26% in the same period of 2023[133]. - Gross margin decreased by $2.3 million, or 8%, with gross margin as a percentage of revenues falling from 26% in 2023 to 17% in 2024, influenced by a shift in contract mix and negative net EAC adjustments[147]. - Net loss increased to $18.1 million for the three months ended June 30, 2024, compared to a net loss of $5.5 million for the same period in 2023, representing a 231% increase[130]. - Net income (loss) attributable to Redwire Corporation was $(26.2) million for the six months ended June 30, 2024, compared to $(12.7) million in the same period of 2023, representing a 106% increase in loss[144]. - Adjusted EBITDA for the six months ended June 30, 2024, was $5.9 million, down from $8.7 million in the same period of 2023[157]. Tax and Other Financial Metrics - Effective tax rate decreased to (0.1)% for the three months ended June 30, 2024, compared to 1.5% for the same period in 2023[140]. - The effective tax rate for the six months ended June 30, 2024, was (0.5)%, compared to 0.9% in the same period of 2023, primarily due to changes in the valuation allowance[153]. - Other (income) expense, net decreased from net other income to net other expense by $8.9 million for the three months ended June 30, 2024, primarily due to changes in the fair value of the private warrant liability[139]. - Other (income) expense, net increased by $8.0 million, or 547%, largely due to a $10.1 million loss from the increase in the fair value of the Company's private warrant liability[152]. Cash Flow and Liquidity - Net cash used in operating activities improved to $6.7 million for the six months ended June 30, 2024, compared to $11.2 million for the same period in 2023, showing better cash flow management[175]. - Net cash provided by investing activities was $0.5 million for the six months ended June 30, 2024, a turnaround from net cash used of $2.5 million in the same period of 2023[176]. - Net cash provided by financing activities increased to $6.9 million for the six months ended June 30, 2024, compared to net cash used of $3.4 million in the same period of 2023, indicating improved financing conditions[177]. - As of June 30, 2024, the company had $30.8 million in cash and cash equivalents and $25.0 million in available borrowings from existing credit facilities, providing a solid liquidity position[168]. Backlog and Future Outlook - The organic backlog as of June 30, 2024, was $354.3 million, down from $372.8 million as of December 31, 2023, indicating a decrease in contracted backlog[164][167]. - The contracted backlog includes $19.0 million in remaining contract value from time-and-material contracts as of June 30, 2024[164]. - The company expects all amounts reflected in contracted backlog to ultimately be fully funded, despite potential fluctuations due to foreign exchange rates[167].

Financial Performance - Revenues for Q2 2024 increased by 30.0% year-over-year to $78.1 million, compared to $60.1 million in Q2 2023[1] - Net Loss for Q2 2024 was $(18.1) million, an increase of $12.6 million from $(5.5) million in Q2 2023[2] - Adjusted EBITDA for Q2 2024 decreased by $2.7 million to $1.6 million, down from $4.4 million in Q2 2023[4] - Free Cash Flow for Q2 2024 decreased by $12.3 million to $(11.2) million, compared to $1.1 million in Q2 2023[4] - Total comprehensive loss for Q2 2024 was $(18,170,000), compared to $(5,326,000) in Q2 2023[24] - Net income for the six months ended June 30, 2024, was a loss of $26,183 thousand, compared to a loss of $12,723 thousand for the same period in 2023[25] - The adjusted EBITDA for the six months ended June 30, 2024, was $5,906 thousand, down from $8,698 thousand for the same period in 2023[27] - Cash flows from operating activities for the six months ended June 30, 2024, resulted in a net cash used of $6,742 thousand, an improvement from $11,204 thousand used in the same period in 2023[25] - Free cash flow for the six months ended June 30, 2024, was $(10,796) thousand, compared to $(13,752) thousand for the same period in 2023[29] Liquidity and Assets - Total available liquidity as of June 30, 2024, was $55.8 million, a 54.1% increase from June 30, 2023[2] - Total current assets decreased to $105,313,000 as of June 30, 2024, down from $109,313,000 at the end of 2023[20] - Cash and cash equivalents increased slightly to $30,832,000 as of June 30, 2024, from $30,278,000 at the end of 2023[20] - The cash and cash equivalents at the end of the period on June 30, 2024, were $30,832 thousand, compared to $11,231 thousand at the end of the same period in 2023[25] Backlog and Contracts - Contracted Backlog increased by 29.9% year-over-year to $354 million as of June 30, 2024, compared to $273 million on June 30, 2023[1] - Book-to-Bill ratio was 1.28 on a last twelve month (LTM) basis as of Q2 2024, compared to 1.49 in Q2 2023[4] - The book-to-bill ratio for the three months ended June 30, 2024, was 1.47, significantly higher than 0.76 for the same period in 2023[31] - Total contracts awarded for the three months ended June 30, 2024, amounted to $114,437 thousand, compared to $45,646 thousand for the same period in 2023[31] - Organic backlog increased to $372,790 thousand as of June 30, 2024, compared to $313,057 thousand as of December 31, 2023, reflecting a growth of 19.1%[33] - Contracted backlog at the end of the period was $354,344 thousand, down from $372,790 thousand as of December 31, 2023, representing a decline of 4.5%[33] - The company expects all amounts reflected in contracted backlog to ultimately be fully funded despite potential terminations or amendments[37] Expenses and Liabilities - Operating loss for Q2 2024 was $(7,130,000), worsening from $(3,856,000) in Q2 2023[24] - Total liabilities increased to $229,844,000 as of June 30, 2024, compared to $218,444,000 at the end of 2023[20] - Convertible preferred stock had a liquidation preference of $242,381,000 as of June 30, 2024, up from $187,780,000 at the end of 2023[22] - Research and development expenses for Q2 2024 were $1,748,000, down from $2,070,000 in Q2 2023[24] - The company incurred acquisition costs related to due diligence and integration expenses, impacting financial performance[26] Growth and Innovation - The company submitted approximately $1.9 billion in bids year-to-date in 2024, indicating strong growth momentum[5] - The company was awarded a prime contract for the SabreSat VLEO platform under DARPA's Otter program, highlighting its innovation and market expansion efforts[1] - Organic additions during the period were $149,538 thousand, down from $300,042 thousand in the previous period, indicating a decrease of 50%[33] - Organic revenue recognized during the period was $(165,903) thousand, an improvement from $(243,800) thousand in the prior period[33] - Foreign currency translation impacts on backlog were $(2,081) thousand for the current period, compared to $3,491 thousand in the previous period[33]

Core Insights - Phase Four and Redwire Space have entered a strategic cooperation agreement to develop Hall Effect Thrusters (HETs) for government and commercial markets, enhancing their capabilities and product offerings [9] - The Valkyrie System, based on NASA's H71M Hall Effect Thruster, will provide a range of propulsion systems with features such as post-launch re-programmability and extensive telemetry for satellite life extension [1][2] Company Overview - Phase Four is a provider of next-generation in-space electric propulsion solutions, founded in 2015, focusing on satellite constellation demands and advancing radio-frequency thruster technology [5] - Redwire Corporation is a global space infrastructure and innovation company, offering a wide range of capabilities including avionics, sensors, and microgravity payloads, with approximately 700 employees across 14 facilities [3] Market Outlook - Both companies believe the market for Hall Effect Thrusters will remain robust, combining Phase Four's propulsion expertise with Redwire's space system market knowledge to create a reliable domestic supplier [2][10] - The addition of Hall Effect Thrusters to Phase Four's product line is a strategic move to expand its in-space propulsion offerings, which already include various propulsion systems and services [6]

Company Overview - Redwire Corporation recently appointed Aaron Futch as its Executive Vice President, General Counsel and Secretary, contributing to a 9.3% increase in its share price to $6.58 [1][4] - The stock has shown a significant 20.9% gain over the past four weeks, indicating strong market interest [4] Earnings Expectations - Redwire is expected to report a quarterly loss of $0.12 per share, reflecting a year-over-year improvement of 25% [5] - Revenue projections for the upcoming quarter stand at $66.86 million, which is an 11.3% increase compared to the same quarter last year [5] Stock Performance and Trends - The consensus EPS estimate for Redwire has remained unchanged over the last 30 days, suggesting stability in earnings expectations [6] - The stock currently holds a Zacks Rank of 3 (Hold), indicating a neutral outlook [3][6] Industry Context - Redwire operates within the Zacks Aerospace - Defense industry, which includes other companies like Virgin Galactic [7] - Virgin Galactic's stock has experienced a decline of 14.3% recently and a total return of -19.6% over the past month, contrasting with Redwire's positive performance [7]

Revenue and Contracts - Revenues increased by $30.2 million, or 52%, for the three months ended March 31, 2024, compared to the same period in 2023, reaching $87.8 million[145] - Total contracts awarded for the three months ended March 31, 2024, were $35.1 million, compared to $29.7 million for the same period in 2023[163] - Revenues for the three months ended March 31, 2024, were $87.8 million, an increase from $57.6 million in the same period in 2023[163] - Redwire's book-to-bill ratio was 0.40 for the three months ended March 31, 2024, down from 0.51 for the same period in 2023[165] - The contracted backlog as of March 31, 2024, was $317.9 million, a decrease from $372.8 million as of December 31, 2023[168] Costs and Expenses - Cost of sales rose by $29.6 million, or 68%, for the three months ended March 31, 2024, totaling $73.0 million[148] - Gross margin increased by $0.6 million, or 4%, for the three months ended March 31, 2024, with a gross margin percentage of 17% compared to 25% in the same period of 2023[149] - Selling, general and administrative expenses increased by $1.3 million, or 8%, for the three months ended March 31, 2024, but as a percentage of revenues, decreased to 20% from 28%[150] - Research and development expenses increased significantly, driven by investments in microgravity payloads, radio frequency, and power generation technologies[152] Cash Flow and Financial Position - Net cash provided by operating activities was $2.8 million during the three months ended March 31, 2024, compared to a net cash used of $14.0 million in the same period of 2023[145] - Cash and cash equivalents at the end of the period on March 31, 2024, were $32.6 million, up from $11.3 million at the end of March 31, 2023[184] - The company had $32.6 million in cash and cash equivalents and $15.0 million in available borrowings from existing credit facilities as of March 31, 2024[173] - Net cash used in investing activities increased to $2.4 million for the three months ended March 31, 2024, from $0.8 million in the same period in 2023[186] - The company did not sell shares to B. Riley during the three months ended March 31, 2024, and had 7,592,939 registered shares available for purchase under the committed equity facility[180] Loss and Taxation - Net loss increased by 12% for the three months ended March 31, 2024, amounting to $8.1 million compared to $7.3 million in the same period of 2023[146] - Interest expense, net increased by $0.3 million, or 10%, for the three months ended March 31, 2024, primarily due to unfavorable changes in variable interest rates[153] - Other (income) expense, net decreased by $0.9 million, or 39%, for the three months ended March 31, 2024, primarily due to changes in the fair value of the Company's private warrant liability[154] - The effective tax rate for the three months ended March 31, 2024 was (1.4)%, compared to 0.4% for the same period in 2023, primarily due to changes in the valuation allowance[155] Future Expectations - The company expects all amounts reflected in contracted backlog to ultimately be fully funded despite potential fluctuations due to foreign exchange rates[172]

Financial Data and Key Metrics Changes - In Q1 2024, Redwire achieved revenue of $87.8 million, representing a 52.4% increase compared to Q1 2023 and a 38.3% increase sequentially [4][12] - The company reported positive adjusted EBITDA of $4.3 million, with a net loss of $8.1 million [4][11] - Free cash flow improved to positive $0.4 million, a year-over-year increase of $15.2 million, while cash from operations was positive $2.8 million, up $16.8 million year-over-year [4][37] - The last 12 months book-to-bill ratio was 1.11 times during the quarter [4][34] Business Line Data and Key Metrics Changes - More than 90% of revenue in Q1 2024 came from funded government programs or global marquee customers, focusing on national security and satellite proliferation [12] - The company secured a $142 million contract for power solutions to an undisclosed satellite manufacturer, indicating strong demand in its power generation offerings [6] Market Data and Key Metrics Changes - Redwire's contracted backlog increased by 10.9% year-over-year to $318 million, with a healthy pipeline of $6.3 billion in identified opportunities [34] - The company reported a significant increase in proposals submitted year-to-date, totaling approximately $610 million, a 177.3% increase compared to the same period in 2023 [34] Company Strategy and Development Direction - Redwire's growth strategy focuses on four key principles: protecting the core, scaling production, moving up the value chain, and venture optionality [28] - The company is actively pursuing advancements in very low Earth orbit (VLEO) technology, with platforms like SabreSat and Phantom being developed for various missions [7][30] - Redwire aims to leverage its microgravity technology for pharmaceutical development, targeting a significant market opportunity in drug discovery [9][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year revenue guidance of $300 million, representing a 23% year-over-year growth rate [14] - The company emphasized the importance of operational excellence and cost efficiency to improve profitability while managing the dynamics of contract awards and revenue recognition [19][81] - Management acknowledged the challenges of the space industry but highlighted the strong demand for their core offerings and the potential for future growth [85] Other Important Information - Redwire's capital expenditures in Q1 2024 were $2.4 million, the highest for a first quarter since going public, alongside $1.0 million in internal research and development investments [13] - The company is focused on maintaining a balance between top-line growth and bottom-line profitability, with SG&A expenses now below 20% of revenue [36][81] Q&A Session Summary Question: Can you discuss the dynamics around win rates and backlog? - Management indicated that win rates are variable due to market dynamics and bid sizes, but they believe their backlog and submitted bids are sufficient to sustain their current year forecast [16][19] Question: What are the lessons learned from EAC adjustments? - Management noted that EAC adjustments highlight the importance of operational excellence and the need for disciplined bidding practices, emphasizing that space projects can be complex and challenging [53][54] Question: How does the company view the venture optionality in the drug discovery market? - Management expressed optimism about the growing interest in microgravity research and the potential for significant market opportunities, indicating that they are transitioning from research to production-level capabilities [45][49] Question: Will proposal submissions remain at elevated levels? - Management confirmed that they are bidding more as a prime contractor and aim to maintain the current level of submissions, although timing can affect quarterly results [73][74]

Financial Performance - Revenues for Q1 2024 increased by 52.4% year-over-year to $87.8 million, compared to $57.6 million in Q1 2023[5] - Net Loss for Q1 2024 was $(8.1) million, an increase of $0.8 million from $(7.3) million in Q1 2023[5] - Adjusted EBITDA for Q1 2024 remained flat at $4.3 million, consistent with Q1 2023[5] - Revenues for Q1 2024 were $87,792,000, a 52.4% increase from $57,605,000 in Q1 2023[28] - Gross margin for Q1 2024 was $14,825,000, compared to $14,217,000 in Q1 2023, reflecting a slight improvement[28] - Net loss for Q1 2024 was $8,096,000, compared to a net loss of $7,258,000 in Q1 2023[28] Cash Flow and Liquidity - Net cash provided by operating activities improved by $16.8 million to $2.8 million in Q1 2024, compared to $(14.0) million in Q1 2023[5] - Free Cash Flow for Q1 2024 improved by $15.2 million to $0.4 million, compared to $(14.8) million in Q1 2023[6] - Cash and cash equivalents increased to $32,569,000 as of March 31, 2024, from $30,278,000 at the end of 2023[24] - Total current assets decreased to $99,915,000 as of March 31, 2024, down from $109,313,000 at the end of 2023[24] - Total liabilities decreased to $213,006,000 as of March 31, 2024, from $218,444,000 at the end of 2023[24] - Free cash flow for Q1 2024 was $397,000, a significant improvement from a negative $14,847,000 in Q1 2023[38] Backlog and Contracts - The Book-to-Bill ratio was 1.11 for the last twelve months as of Q1 2024, down from 1.76 in Q1 2023[5] - Book-to-bill ratio for Q1 2024 was 0.40, down from 0.51 in Q1 2023, indicating a decline in contracts awarded relative to revenues[40] - The organic backlog as of March 31, 2024, was $317.964 million, a decrease from $372.790 million as of December 31, 2023[46] - Contracted backlog as of March 31, 2024, was $317.964 million, reflecting the estimated dollar value of firm funded executed contracts for which work has not been performed[46] - Contracted backlog from foreign operations in Luxembourg and Belgium was $96.6 million and $106.0 million as of March 31, 2024, and December 31, 2023, respectively[50] - The company expects all amounts reflected in contracted backlog to ultimately be fully funded[50] Research and Development - Research and development expenses increased to $1,040,000 in Q1 2024, compared to $388,000 in Q1 2023, indicating a focus on innovation[28] - Redwire achieved positive net cash flow from operations and Free Cash Flow while investing record amounts in R&D and CapEx in Q1 2024[7] Shareholder Equity - Total shareholders' equity (deficit) was $(49,792,000) as of March 31, 2024, compared to $(43,509,000) at the end of 2023, reflecting a worsening equity position[26] Company Outlook - The company forecasts full-year revenues of $300 million for 2024[7] - The pipeline increased to approximately $6.3 billion, with $610.0 million in bids submitted year-to-date through March 31, 2024[2] - The company views growth in backlog as a key measure of business growth[46] - The company reported no acquisition-related backlog activity as all acquired entities have completed four fiscal quarters post-acquisition[49]